Calling the $32.9 billion budget legislators approved Monday "historic" for its move to reduce spending, Gov. Corzine yesterday signed into a law a piece of that plan aimed at reducing the state workforce.

The new law offers incentives for early retirement that are intended to move 2,144 workers off the state payroll. Corzine hopes to cut an additional 1,000 jobs through attrition.

"We really are reprioritizing how government works, restructuring; we talked about reshaping, resizing government," Corzine said. The retirement package "is central to that."

He said the plan includes no layoffs, although the idea had been discussed earlier in the year.

The early retirement offer comes after two recent state reports urged a moratorium on such incentives, saying they often cost more in the long run than they save.

A 2005 task force commissioned by then-Gov. Codey first made the recommendation and a bipartisan panel of lawmakers reiterated the warning a year later, saying incentives offered in 2002 had saved $314 million but cost $645 million in long-term pension obligations.

"Early retirement does not work . . . it costs us money," said Sen. Kevin O'Toole (R., Essex), a member of the lawmakers' panel who voted against the early retirement plan Monday.

Corzine said he would avoid the problems of past offers by hiring back only one of every 10 workers who accept the retirement package.

His administration estimates the plan will add $250 million of long-term pension costs but save $264 million over the next three years.

In addition, Corzine has agreed to issue an executive order restricting the size of the executive branch and requiring annual reports on the results of the retirement program.

Those provisions had been stripped from the retirement bill, but were restored in negotiations late Monday to entice Assembly Republicans to provide the final votes needed to approve benefit cuts pushed by Democrats.

"We are going to be firm in how we go about implementing the backfilling of these positions," Corzine said.

Lawmakers, citing the long-term costs, were wary of the early retirement plan and pushed for benefit cuts as a way to help offset those expenses. Among the cuts: eliminating Lincoln's birthday as a state holiday, raising the retirement age for state workers two years to 62, and increasing the salary requirements to qualify for pension credits. They won approval late Monday after a nearly four-hour vote on the bill.

Assembly Republicans initially held out their votes on the proposal, stalling the plan as some Democrats abstained or voted no, but the GOP supported the changes after hours of closed-door talks.

Senate Democrats estimate the benefit changes will save $300 million over 15 years. Corzine, however, has said the concessions he won in contract negotiations last year saved $6.4 billion over the same time period while giving up $358 million in raises over four years.

The early retirement plan would be open to state workers aged 58 or older with at least 10 years of pension credits. The incentives would depend on a combination of age and experience, and include extra pension credits or paid health benefits for retirees who might not normally qualify.

The executive branch has a 68,330-person payroll.

Some employees are ineligible for the buyouts. Workers who serve in "direct care" positions, such as state psychiatric hospitals, prisons, or who aid the developmentally disabled or children, are not eligible. Workers have until July 15 to accept.

While Corzine praised the budget for cutting spending, he defended the growth of a borrowing plan for school construction that expanded from $2.5 billion to $3.9 billion.

The original $2.5 billion would have gone only to the 31 school districts that receive enhanced state support due to a series of Supreme Court cases. Corzine, who has called school funding a moral obligation, said the extra money will help other districts as well.

"At-risk children in this state aren't all located in" the 31 districts covered by the court, Corzine said yesterday. "I feel like it's relatively appropriate."

Republicans questioned whether the money will be spent wisely and criticized Democrats for backing school borrowing without voter approval, and then hours later advancing a plan to amend the Constitution to give the public more say on government bonding.

"This debt is a sword of Damocles that hangs down on our children and grandchildren," said Sen. Leonard Lance (R., Hunterdon), who cosponsored the debt limitation plan and voted against against the school bonds.